Selling Online? Understand Your Tax and National Insurance Obligations

What Counts as a Side Hustle?

The term “side hustle” may sound modern, but it has been in use since the early 20th century. Today, it typically refers to any additional source of income outside your primary employment. Common examples include selling goods or services online through platforms like eBay, Amazon, Etsy, Vinted or Facebook Marketplace.

If your sales generate income, it’s important to consider potential liabilities for:

• Income Tax
• National Insurance Contributions (NICs)
• Capital Gains Tax (CGT)
• Value Added Tax (VAT) if your total income from all sources exceeds the current £90,000 threshold

When Online Selling Isn’t Trading

Not all online sales are classed as trading. For example, selling personal possessions that you no longer need — such as used clothes, books, or household items — typically does not give rise to income tax, provided they were not bought with the intention of resale.

However, CGT may apply if you sell personal possessions (known as “chattels”) for more than £6,000. This threshold applies to individual items or sets, such as a matching pair of ornaments or a collection of rare books. Special rules apply when calculating gains on such sales.

When Online Income Is Trading

If you’re making, buying and reselling, or ‘upcycling’ items with the aim of making a profit, then you’re likely engaged in trading. The same applies if you're offering services online — from tutoring, babysitting, and dog walking to ride-hailing, delivering food, or renting out equipment.

In these cases, income tax and NICs may be due, and you may need to register with HMRC and file a self-assessment tax return.

The £1,000 Trading Allowance

HMRC provides a helpful £1,000 trading allowance each tax year. If your total gross income from side hustles is under this amount, there is usually no need to report it to HMRC. If you earn more than £1,000, you have two options:

1. Deduct the £1,000 trading allowance from your gross income and pay tax on the remainder.
2. Claim actual allowable expenses incurred wholly and exclusively for the activity instead of the allowance.

If your side hustle generates a loss, it might be more tax-efficient to forgo the allowance and offset the loss against other income, depending on your circumstances.

New Rules for Online Platforms

From 1January 2024, online marketplaces are required to collect and potentially share seller information with HMRC. Reporting applies if you make over 30 sales per calendar year and generate more than €2,000 (around £1,700).

HMRC will cross-reference this data with tax returns, so undeclared income may trigger enquiries, interest charges, and penalties. The good news is that platforms must also provide sellers with a copy of the information sent to HMRC — a useful resource when preparing your tax return.

Keep Accurate Records

Whether you’re selling products or offering services, keeping clear records of income and expenses is essential. This not only helps determine whether you have a tax liability, but also ensures you can support any claims made in your tax return.

Practical Tip

The principles outlined above don’t just apply to selling items or services. Income from letting out property through digital platforms — such as a spare room or even a driveway for parking — may also be taxable and subject to similar rules.

If you're unsure whether your online income needs to be reported, or how to best manage your tax obligations, get in touch with our team. We're here to help you stay compliant and make the most of your income — whatever your side hustle may be.

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